Sprouting angiogenesis is stimulated by vascular endothelial growth factor (VEGF165) that is localized in the extracellular matrix (ECM) and binds to heparan sulfate (HS)-bearing proteins known as heparan sulfate proteoglycans (HSPGs). VEGF165 presentation by HSPGs enhances VEGF receptor-2 (VEGFR2) signaling. We investigated the effect of TG2, which binds to HSPGs, on the interaction between VEGF165 and HS and angiogenesis. Mice with tg2 deficiency showed transiently enhanced retina vessel formation and increased vascularization of VEGF165-containing Matrigel implants. In addition, endothelial cells in which TG2 was knocked down exhibited enhanced VEGF165-induced sprouting and migration, which was associated with increased phosphorylation of VEGFR2 at Tyr(951) and its targets Src and Akt. TG2 knockdown did not affect the phosphorylation of VEGFR2 at Tyr(1175) or cell proliferation in response to VEGF165 and sprouting or signaling in response to VEGF121. Decreased phosphorylation of VEGFR2 at Tyr(951) was due to ECM-localized TG2, which reduced the binding of VEGF165 to endothelial ECM in a manner that required its ability to bind to HS but not its catalytic activity. Surface plasmon resonance assays demonstrated that TG2 impeded the interaction between VEGF165 and HS. These results show that TG2 controls the formation of VEGF165-HSPG complexes and suggest that this regulation could be pharmacologically targeted to modulate developmental and therapeutic angiogenesis